FAT Brands Inc. (FAT) research, news, and more from GeoInvesting

Company description

Fri, 29 Sep 2017 17:56:30 GMT

"...FAT Brands is a leading multi-brand restaurant franchising company that develops, markets, and acquires predominantly fast casual restaurant concepts around the world. As a franchisor, we generally do not own or operate restaurant locations, but rather generate revenue by charging franchisees an initial franchise fee as well as ongoing royalties. This asset light franchisor model provides the opportunity for strong profit margins and an attractive free cash flow profile while minimizing restaurant operating company risk, such as long-term real estate commitments or capital investments. Our scalable management platform enables us to add new stores and restaurant concepts to our portfolio with minimal incremental corporate overhead cost, while taking advantage of significant corporate overhead synergies and franchisee cross-selling opportunities. The acquisition of additional brands and restaurant concepts as well as expansion of our existing brands are key elements of our growth strategy.

We currently operate the Fatburger, Buffalo’s Cafe and Buffalo’s Express restaurant concepts, with 176 total locations across seven states and 18 countries as of June 25 , 2017. Our overall footprint (including development agreements for proposed stores in new markets and nine countries where our brands previously had a presence that we intend to resell to new franchisees) covers 32 countries . For each of our current restaurant brands and those that we will seek to acquire, the ability to expand the overall concept footprint, both domestically and internationally, is of critical importance and a primary acquisition evaluation criterion. We believe that our restaurant concepts have meaningful growth potential and appeal to a broad base of consumers globally..."

Research

Thu, 30 Nov 2017 15:35:10 GMT

Fat Brands Inc. (NASDAQ:FAT) ($9.55; $76.4M market cap), a restaurant operator, announced Q3 2017 results:

Sales of $3.5 million vs $4.1 million in the prior year
EPS of $0.15 vs $0.19 in the prior year

Quotes from management:

“FAT Brands is built for growth. Our robust management and systems platforms support the expansion of our existing brands, while enabling the accretive acquisition and efficient integration of additional restaurant concepts. This scalable platform generates significant efficiencies in franchise support services and corporate overhead. Pro forma for the Hurricanes acquisition and expected synergies, we expect annualized revenue to exceed $17 million, and annualized adjusted cash earnings of greater than $11 million, or $1.10 per share”

The conference call gave some positive hints regarding the FCCG/FAT relationship. FCCG will not pay management salaries, which will be paid by FAT. This alleviates the fear of FCCG burning through cash with salary expenses.

Also, management stated in the question and answer section of the call that the dividend distribution from Fatbrands will be equal to all shareholders, including FCCG, but management can’t comment at this point on the pass through of the dividend to FCCG shareholders due to the fact that FCCG is currently dark.

Finally, management hinted at a possible merger or other transaction to combine FCCG and FAT again in order to take full advantage of the tax-loss carryforwards on the FCCG level. Management refused to comment on the size of the tax-loss carryforwards on FCCG or give any concrete numbers of FCCG, but it was noteworthy that many of the questions on the call were about the FCCG/FAT dynamic.

We find the commentary on the conference call encouraging for FCCG shareholders because it shows that analysts seem to be aware of the relationship and are intrigued by the apparent opportunity, and that management is perceiving the current setup as at least a potential issue and is looking for ways to solve it.

We will continue to interpret what the implications of management’s comments mean for FCCG shareholders.

Research

Thu, 16 Nov 2017 18:02:33 GMT

Fat Brands Inc. (NASDAQ:FAT) ($9.55; $76.4m market cap), a restaurant operator, announced the acquisition of Hurricane Grill & Wings for $12.5 million.

“Pro forma for the acquisition and expected synergies from the combined companies, the Company expects its annualized revenue to exceed $17 million and annualized adjusted cash earnings to exceed $11 million, or $1.10 per common share based on 10 million shares outstanding. The combined company’s franchisees will operate approximately 350 restaurants around the globe, with system-wide sales exceeding $360 million”

The company also announced its dividend plans:

“Based on our expected free cash flow in 2018, we expect to pay an annualized dividend of $0.48 per common share starting in 2018, subject to the declaration and approval by the board of directors, which represents an implied yield of approximately 5% based on the current share price.”

In our September 27, 2017 email, we highlighted a speculative situation involving FCCG which is the publicly traded parent company of Fat Brands. You can read our full coverage on FCCG here.